Cardinal Health 2011 Annual Report Download - page 61

D
eferred income taxes arise from temporary differences between financial reporting and tax reporting base
s
of
assets an
dli
a
bili
t
i
es, as we
ll
as net operat
i
ng
l
oss an
d
tax cre
di
t carry
f
orwar
d
s
f
or tax purposes. T
h
e
f
o
ll
ow
i
ng
table
p
resents information about our tax
p
osition
:
Fi
sca
l
y
ear ende
d
J
une 30
,
N
et de
f
erred
i
ncome tax
assets
(
in millions
)
N
et de
f
erred
i
ncome tax
l
iabilities
(
in billions
)
Net loss and cred
i
t carr
yf
orwards
i
ncluded
i
n net de
f
erred
i
ncome
tax assets
(
in millions
)
N
et valuat
i
on allowanc
e
(in millions) a
g
ains
t
deferred tax assets
(
1
)
2011
$
543
$
1.4
$
190
$
158
2010 $578 $1.2 $197 $18
3
(1) This valuation allowance primarily relates to federal, state and international loss carryforwards for whic
h
t
h
eu
l
t
i
mate rea
li
zat
i
on o
ff
uture
b
ene
fi
ts
i
s uncerta
i
n
.
Expiring carryforwards and the required valuation allowances are adjusted annually. After applying th
e
v
a
l
uat
i
on a
ll
owances, we
d
o not ant
i
c
i
pate any
li
m
i
tat
i
ons on our use o
f
any o
f
t
h
eot
h
er net
d
e
f
erre
di
ncome tax
a
ssets described above
.
We
b
e
li
eve t
h
at our est
i
mates
f
or t
h
eva
l
uat
i
on a
ll
owances aga
i
nst
d
e
f
erre
d
tax assets an
d
unrecogn
i
ze
d
tax
benefits are appropriate based on current facts and circumstances. However, other companies appl
y
in
g
reasonable judgment to the same facts and circumstances could develop different estimates. The amount we
ul
t
i
mate
l
y pay w
h
en matters are reso
l
ve
d
may
diff
er
f
rom t
h
e amounts accrue
d.
T
ax benefits from uncertain tax positions are recognized when it is more likely than not that the positio
n
w
ill b
e susta
i
ne
d
upon exam
i
nat
i
on,
i
nc
l
u
di
ng reso
l
ut
i
ons o
f
any re
l
ate
d
appea
l
sor
li
t
i
gat
i
on processes,
b
ase
d
on
the technical merits. The amount reco
g
nized is measured as the lar
g
est amount of tax benefit that is
g
reater tha
n
5
0 percent likely of being realized upon settlement (see Note 9 of “Notes to Consolidated Financial Statements”
f
or a
d
eta
il
e
ddi
sc
l
osure o
f
t
h
e unrecogn
i
ze
d
tax
b
ene
fi
ts)
.
I
f any of our assumptions or estimates were to change, an increase or decrease in our effective tax rate by 1
percent on earn
i
ngs
b
e
f
ore
i
ncome taxes an
ddi
scont
i
nue
d
operat
i
ons wou
ld h
ave cause
di
ncome tax expense t
o
increase or decrease b
y
$15 million for fiscal 2011.
Sh
are-
b
ase
d
Com
p
ensation
A
ll share-based payments to employees, including grants of options, are recognized in the consolidate
d
statements o
f
earn
i
ngs
b
ase
d
on t
h
e grant
d
ate
f
a
i
rva
l
ue o
f
t
h
e awar
d
.T
h
e
f
a
i
rva
l
ue o
f
stoc
k
opt
i
ons
i
s
d
etermined usin
g
a lattice valuation model. We believe the lattice model provides for better estimates because i
t
h
as the ability to take into account employee exercise patterns based on changes in our stock price and othe
r
v
ar
i
a
bl
es an
di
t prov
id
es
f
or a range o
fi
nput assumpt
i
ons.
D
uring fiscal 2011 and 2010, we calculated separate option valuations for two separate groups o
f
emp
l
oyees. Dur
i
ng
fi
sca
l
2009, we ca
l
cu
l
ate
d
separate opt
i
on va
l
uat
i
ons
f
or t
h
ree separate groups o
f
emp
l
oyees
.
T
he
g
roups were determined usin
g
similar historical exercise behaviors. The expected life of the options
g
rante
d
was calculated from the option valuation model and represents the length of time in years that the options grante
d
a
re expecte
d
to
b
e outstan
di
ng. Expecte
d
vo
l
at
ili
t
i
es are
b
ase
d
on
i
mp
li
e
d
vo
l
at
ili
ty
f
rom tra
d
e
d
opt
i
ons on ou
r
C
ommon Shares and historical volatilit
y
over a period of time commensurate with the contractual term of th
e
o
ption grant (7 years). As required, the forfeiture estimates will be adjusted to reflect actual forfeitures when a
n
a
war
d
vests. T
h
e actua
lf
or
f
e
i
tures
i
n
f
uture report
i
ng per
i
o
d
s cou
ld b
e
hi
g
h
er or
l
ower t
h
an our curren
t
estimates
.
3
5